The Week in Real Estate


Hilton Parkes Real Estate

19th January 2019

Employment Key To Strong Market

High employment is the key factor in keeping Australian property markets strong in the face of price decline in Sydney and Melbourne, according to lender Bankwest.
Bankwest managing director Rowan Munchenberg says that provided employment continues to be as strong as it is, the price correction in the biggest cities will not create problems.
“Employment still remains high and while that is the case, despite flat wage growth, it will be the key for economic prosperity and the ability for people to pay off their debt,” he says. “While unemployment remains low we are in a good place.
“Internally we plan for multiple scenarios around what’s happening in the marketplace and what’s happening with house prices whether it be further decline, being level or some increases. We’re not seeing any evidence of anything falling off a cliff.” Munchenberg says the bank, like the rest of the sector, has reined in investor lending due to APRA regulations. “That has had a pricing effect and a demand dampening effect across the industry,” he says.

New Data Reveals Positive Position

Price data from leading industry website shows market conditions across Australia are highly variable and generally present a positive outlook for the market.
The numbers show that Hobart has continued to out-perform, with prices rising 8.4% in the past year. It records annual house price decline of 5.9% in Sydney and 1.5% in Melbourne, considerably less than the rate of decline claimed
by CoreLogic. Adelaide prices rose 1.1% on average but its high rate of views per listing – 1257 – reflects a market in strong demand, says chief economist Nerida Conisbee .
She says tighter lending and negative sentiment have caused lower house prices in some cities, but she expects the low jobless rate to help the biggest cities ride out the downturn. “We’re not seeing the big jumps in listings that are typical of a price crash,” Conisbee says. She says APRA winding back the cap on interest-only loans in December was the first sign it will get easier to borrow.

Rents Strong In Six Capital Cities

The Domain Rental Report shows that rents are stronger than sale prices in terms of growth in the past year. Six of the eight capital cities delivered growth in their rentals in 2018, both for houses and for apartments.
There is, as always, a strong correlation between vacancy rates and rental growth.
The cities with the tightest rental markets, Hobart and Canberra, are the ones with the highest annual growth in their rentals. Canberra now has the highest average house rents in the nation, up 3.7% to $560 per week, having overtaken Sydney when average rents have fallen.
Other cities with low vacancies, Adelaide and Melbourne, have also recorded solid growth in their rentals.
Two cities where vacancy rates have been high in the recent past but have improved recently – Brisbane and Perth – are also both delivering moderate growth in their rents – around 2-3% in 2018.
The only cities where rents have fallen in the past year are those where vacancies
are trending higher – Sydney and Darwin.

Vacancies Stay Tight In Most Cities

Vacancies remain tight in most capital cities, despite seasonal rises in vacancies in December, according to the latest data from SQM Research. Most cities have vacancies similar to or less than those at the same time last year.
Hobart continues to have the tightest rental market with a vacancy rate of just 0.4%, while Canberra and Adelaide both have vacancies a little over 1%.
Melbourne’s vacancy rate was around 2% in December, the same as a year earlier.
Brisbane’s rate has improved considerably over the past year, falling from 3.8% to 3.2%, while Perth vacancies have dropped from 4.6% to 3.4%.
The only city where vacancies are trending to uncomfortably high levels are Sydney, where they’ve risen from 2.6% a year ago to 3.6%, and Darwin which is up from 3.5% to 4.3%.
SQM says the capital city average vacancy rate was 2.5% in December, the same as 12 months earlier. “The rise in vacancies in December (compared to November) was due to
seasonality,” SQM managing director Louis Christopher says.

Short-Stay Rentals Claim Legal Win

Short-stay rental operators have won a legal victory amid growing pressure for industry regulation.
An apartment owner in the Melbourne suburb of Doncaster, who flouted rules aimed at stopping short-term stays, has been given the all-clear after he challenged the building’s owners corporation in the Victorian Civil and Administrative Tribunal.
Zheng Sheng Lim, who co-owns an apartment in the Imperial building at Sovereign Point Court, Doncaster, challenged rules banning short-term stays. The owners’ corporation had deactivated a security key fob for the building after accusing the owner of repeated breaches of the rules.
However, after the matter was brought to VCAT the owners corporation admitted special rules it had registered to stop short-term tenancies were “probably invalid”, documents show.
VCAT ruled the owners’ corporation did not have the right to deactivate security fobs or restrict tenant access to the building, except in emergencies. Airbnb Australian head of public policy Brent Thomas says the case validated past rulings around the country.

Quote of the Week

“We plan for multiple scenarios around what’s happening in the marketplace and what’s happening with house prices whether it be further decline, being level or some increases. We’re not seeing any evidence of anything falling off a cliff.”

Rowan Munchenberg, Bankwest managing director

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